Jim Rogers decries the growing uncertainty and recklessness of global central planners as the world enters unchartered financial markets:

For the first time in recorded history, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How it’s going to work out, I don’t know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? because they are all trying to debase themselves. It’s a peculiar time in world history.

I own the dollar, not because I have any confidence in the dollar and not because it’s sound – it’s a terribly flawed currency – but I expect more currency turmoil, more financial turmoil. During periods like that, people, for whatever reason, flee to the U.S. dollar as a safe haven. It is not a safe haven, but it is perceived that way by some people. That’s why the dollar is going up. That’s why I own it. Will I own it in five years, ten years? I don’t know.

It makes it extremely difficult for the investor looking for acceptable risk/reward, or the saver looking to protect their purchasing power; as in Rogers’ view, all options have their problems:

I own gold and silver and precious metals. I own all commodities, which is a better way to play as they debase currencies. I own more agriculture than just about anything else in real assets because of the reasons we discussed before. We were talking before about the risk-free or worry-free investment. Even gold: the Indian politicians are talking about coming down hard on gold, and India is the largest buyer of gold in the world. If Indian politicians do something — whether it’s foolish or not is irrelevant — if they do something, gold could go down a lot. So I own it. I’m not selling it. But everything has problems.

To Rogers, the bigger danger that concerns him is the hollowing out of the ‘saving class’ resulting from this situation. Central planners’ policies are punishing the prudent in favor of rescuing the irresponsible. This has happened before in world history, and the aftermath has always had grievous economic, social — and often human — costs:

Throughout our history – any country’s history – the people who save their money and invest for their future are the ones that you build an economy, a society, and a nation on.

In America, many people saved their money, put it aside, and didn’t buy four or five houses with no job and no money down. They did what most people would consider the right thing, and what historically has been the right thing. But now, unfortunately, those people are being wiped out, because they are getting 0% return, or virtually no return, on their savings and their investments. We’re wiping them out at the expense of people who went deeply into debt, people who did what most people would consider the wrong thing at the expense of people who did the right thing. This, long-term, has terrible consequences for any nation, any society, any economy.

If you go back in history, you’ll see what happed to the Germans when they wiped out their savings class in the 1920s. It didn’t lead to good things down the road for Germany. It didn’t lead to good things for Italy, which did the same thing. There were plenty of countries where it wiped out the people who saved and invested for their future. It’s usually a serious, political reaction, desperation in some cases, and looking for a savior and easy answers is usually what happens when you destroy the people who save and invest for the future.

Transcript

Chris Martenson: Welcome to another PeakProsperity Podcast. I am your host, of course, Chris Martenson. Today we welcome back to the program Jim Rogers. Jim is one of those individuals whose accomplishments are too many to list succinctly. He’s a renowned financial commentator, Guinness World Record holder, successful international investor, and author of a number of bestselling books including Street Smarts: Adventures on the Road and in the Markets, just released on February 5, 2013. He graciously agreed to join us today to help make sense of today’s gravity-defying markets where even bad news seems to drive stock prices higher. It’s a QE-to-eternity world today. How do we chart a prudent course from here?

Jim, thanks so much for coming back on to the program today.

Jim Rogers: My delight, Chris, my delight.

Chris Martenson: Let’s start with your take on the nature of today’s markets. You have said the Fed has thrown fake money at bad debts and we are all going to suffer. Yet you are bullish on Japanese equities because they are debasing their currency. How do you reconcile these views?

Jim Rogers: Well, there are a couple of differences, Chris. One is, the Japanese market is down 70% from its all time high. The U.S. market is at its all time high. The United States is the largest debtor nation in the world, both domestically and internationally. The Japanese are the second largest creditor nation in the world on an international basis. They do have high internal debt, but there are differences in the two. And between the two, I would rather own shares in Japan which is down 70% from its all time high. Chris, it was 23 years ago that the Japanese market made its high. I would rather be there than here.

Chris Martenson: Absolutely. So in seeing the spat Japan is having with China, noting that they are importing a lot of energy and that there current account deficit is slipping, does this cause you any concern?

Jim Rogers: Absolutely, it causes me concern. I wish there was an easy way to make some money. I wish I could find an investment that had no concerns. Have you found one of those yet? Please tell me.

Chris Martenson: Well, let’s talk about that. With force-feeding by central banks everywhere, driving the price of everything to all-time highs – bonds, stocks, you name it – is investing even possible today?

Jim Rogers: Is investing possible these days? Well, gosh, you’ve got to do something with your money. Even if you just put your money in the bank, that’s doing something, because you’ve got it there in some currency. No matter what you do, you have some kind of investment. Whether it’s possible or not is one thing, but you’ve got to do something with your money. We’re making a decision every day whether we know it or not.

Chris Martenson: I agree. Now let’s talk about commodities. The last time you and I talked – that was 2011 – you were quite bullish on commodities. I see that wheat has just put in an eight-month low. Corn is close doing the same. Rice and soybeans are about where they were a year ago. Prior QE efforts were associated with huge upward moves in commodities, but not this time – at least not yet. What’s going on?

Jim Rogers: Between 2011 and now, corn and wheat did have a skyrocket, and a few other things. Yes, they are down now. Certainly that’s clear. But they did go up quite a lot during that period of time. As far as I can see, it’s a fact that they went up so much and now they’re having normal corrections because whenever it’s the winter you know, people can speculate either way on what the weather is going to be in 2013/2014. So, we have what is a normal correction for this time of year in agricultural commodities. You can ask me in a year to two whether I was right about that or not, but I’m still bullish.

Chris Martenson: I see the global grain stocks are at 40-year lows on the basis of days of supply. I just read today that a leading U.S. ethanol maker – that’s POET Refining – is bidding for red winter wheat because supplies of corn have fallen to the lowest in the U.S. in 17 years. Yet corn is still trending down. Is this just normal behavior, or is something else going on here?

Jim Rogers: As I said, I think it’s normal seasonal behavior. Certainly I know that inventories are near historic lows worldwide for agricultural products. Not just that, Chris – we’re running out of farmers. The average age of farmers in America is 58 and Japan is 66. I could go on and on. More people in America study public relations than study agriculture. No, it’s not just that inventories are low. We’re running out of farmers. We’re going to have gigantic problems in agriculture over the next decade or two. Whether they are rough in 2013 or not, I’m not smart enough to know, but I know that prices have to go much, much higher to attract capital labor and management, or we’re not going to have any food at any price.

Chris Martenson: I understand that view. Now let’s talk currencies for a minute. I see the dollar has rallied of late, now sitting at a little more than 82½ on the USD Index. The euro is now below 130. The pound just broke through 150, this aftermarket today. The yen is getting ready to break through that floor at about 106, off which it has been bouncing for a month. How do you see these currencies playing out from here? Which ones are going to win and who is going to lose?

Jim Rogers: Boy, Chris, if you can answer that, we’re all going to be rich aren’t we?

Chris Martenson: I was hoping you would know.

Jim Rogers: I own the dollar, not because I have any confidence in the dollar and not because it’s sound – it’s a terribly flawed currency – but I expect more currency turmoil, more financial turmoil. During periods like that, people, for whatever reason, flee to the U.S. dollar as a safe haven. It is not a safe haven, but it is perceived that way by some people. That’s why the dollar is going up. That’s why I own it. Will I own it in five years, ten years? I don’t know.

The first time in recorded history, Chris, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How it’s going to work out, I don’t know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? because they are all trying to debase themselves. It’s a peculiar time in world history.

Chris Martenson: Well, against what? Let’s talk about the one barometer that most people are looking at – gold. It’s been stuck in a consolidation range for going on almost two years now. Are you still a fan of holding gold as a hedge against this debasement that you’re seeing ongoing, or is there a better way to play this?

Jim Rogers: I own gold and silver and precious metals. I own all commodities, which is a better way to play as they debase currencies. I own more agriculture than just about anything else in real assets because of the reasons we discussed before. We were talking before about the risk-free or worry-free investment. Even gold – you know, the Indian politicians are talking about coming down hard on gold, and India is the largest buyer of gold in the world. If Indian politicians do something, whether it’s foolish or not is irrelevant. If they do something, gold could go down a lot. So I own it. I’m not selling it. But everything has problems.

Chris Martenson: Everything has problems. I’m looking at people who are thinking about being savers or those who want to invest. Recently you said that every nation in the world wants people to save and invest because the people who save and invest build your country, but in America we are destroying that class of people now. Is this what you’re talking about, that we’ve destroyed investing because there’s nothing prudent to invest in, or do you have more behind that comment?

Jim Rogers: No, of course throughout our history – any country’s history – the people who save their money and invest for their future are the ones that you build an economy, a society, and a nation on. In America, many people save their money, put it aside, and didn’t buy four or five houses with no job and no money down. They did what most people would consider the right thing, and what historically has been the right thing. But now, unfortunately, those people are being wiped out, because they are getting zero return or virtually no return on their savings and their investments. We’re wiping them out at the expenses of people who went deeply into debt. People who did what most people would consider the wrong thing at the expense of people who did the right thing. This, long-term, has terrible consequences for any nation, any society, any economy.

Chris Martenson: But what are some of those consequences as you see them?

Jim Rogers: If you go back in history, you’d see what happed to the Germans when they wiped out their savings class in the 1920s. It didn’t lead to good things down the road for Germany. It didn’t lead to good things for Italy, which did the same thing. There were plenty of countries where it wiped out the people who saved and invested for their future. It’s usually a serious, political reaction, desperation in some cases, and looking for a savior and easy answers is usually what happens when you destroy the people who save and invest for the future.

Chris Martenson: I’ve seen a couple of comments from Bernanke around this, specifically one where he was asked by a congressman how his low interest rates might have hurt savers, and Bernanke responded that at least the stock market was up – which is no consolation, I suppose, to a 90-year-old pensioner living off a fixed-income portfolio. I also hear Bernanke say that he was proud of the fact that people with mortgages had saved about a trillion dollars in interest payments over the past four years because of lowered interest rates. That’s about how much savers would have lost in income off of their bank accounts over the same period of time. So, what you’re talking about here – is this is a transfer from those who would save and invest to those who would borrow and spend?

Jim Rogers: Yes. Clearly it’s pretty simple to figure it out – people who have got money in the bank or in bonds aren’t getting any return. People who owe money are being helped to some extent if they have variable-rate mortgages. Not everybody has a variable rate mortgage. But the people who did or do are people who can refinance and are certainly saving money. That’s certainly at the expense of the banking system, too, unless they are very quick in depth.

The bond market, of course, is people who own bonds. Mr. Bernanke was talking just about the people who have mortgages. There are lots of other people who own bonds. And many insurance companies are having serious problems and will down the road have worse problems. As you know, most pension plans in America are suffering grievously. Most of them are now underwater because of these low interest rates. I noticed Mr. Bernanke did not bring up pension plans, endowments, or insurance companies, all of whom are suffering badly.

Chris Martenson: Now the Fed’s on record saying they’re going to wait for a couple of signs. Potentially one being unemployment returning to 6.5%, the other if inflation ticks over 2.5%, they might consider an early termination or termination to their QE program. Is that really what they’re after here, do you think? Or, what are they looking at? People that I talked to are confused. Investors are confused. Professional money managers are confused because we have stocks at all-time highs. We have bonds at all-time highs. And yet, we still get all this money printing. What is the Fed really up to here? What are they worried about?

Jim Rogers: Well, you said it. They’re printing money. That’s why bonds are up. They’re buying gigantic amounts of bonds. That’s why stocks are up. They’re flooding the world with money. It’s got to go somewhere. They say they’re going to wait for whatever inflation numbers they want. Well, you’ve got to remember that the inflation numbers they control. There are those, including me, who say the inflation numbers that are being reported are a sham. They’re not accurate. But since the Federal Government can control the Fed, they reported inflation numbers that make them look good. They have many reasons to, including Dr. Bernanke.

I don’t think they have any idea what they’re doing. They say that when inflation gets to a certain level they might do something. They say when unemployment gets to a certain level they might do something, and maybe they will. But on the other hand, let’s say that they start reversing themselves. It’s certainly going to cause a lot of excitement and a lot of interest in the markets if and when they start reversing themselves.

You’ve got to remember that the Federal Reserve – the central bank in America – has quadrupled its balance sheet in the last few years. I don’t think that’s ever happened in recorded history, either. A lot of the stuff they have on their balance sheet is garbage. So, if and when they start reversing, it’s going to cause more confusion or more interesting times in the markets.

Chris Martenson: Interesting times, indeed. I don’t believe that they’ve run any reverse promo or reverse operation of any size. They were all under a billion. So, we’ll wait and see what happens when they try and get a trillion back out of the market. That’ll be certainly very interesting.

Moving on to China. I don’t know if you saw it, but 60 Minutes had a big piece on what they called the “Chinese housing bubble.” You and I discussed it two years ago back when, I think, there was a quant price-to-income ratio in some major Chinese cities of around 20. In the CBS 60 Minutes piece they noted it as high as 43 in the town/city they were looking at. What’s your view on China here? We all know they have something of a bubble there, but where do they go from here, and can they generate domestic demand to wean themselves off of being tied to their export vagaries, as it were? Where do you see China now?

Jim Rogers: When you say there’s a bubble in China, what kind of bubble? I know there was a real-estate bubble, and it seems to be coming back. What kind of bubble other than that? That’s close to real estate. What kind of bubble are you talking – did you see [something] that I don’t know about?

Chris Martenson: That was a real-estate bubble where the priced income of housing in major cities had gone over 40 – a huge ratio. That was what was noted there.

Jim Rogers: There’s no question that there was, and is perhaps coming back, a real-estate bubble, a property bubble, in urban coastal real estate in China. That’s for sure, if that’s what you mean. The Chinese tried to pop it. They spent several years – two or three years I should say – trying to pop it. They did get it to come down. They did get things to cool off to a certain extent, and they continue to try to control prices and drive down prices of real estate.

Unfortunately for them, the market has more money than they do, as usual, and some of their measures have not been as strong or tough as perhaps they should have been. It’s when you do have things start going down that you get a lot of piles of complaints, and then they soften up. Prices are too high for some properties in China, but it’s not as bad as it was three years ago or so. I didn’t see the 60 Minutes report. Usually 60 Minutes and most journalists are behind the times, so it would give one pause. I’m not going out to short Chinese property. Not yet anyway.

Chris Martenson: Yeah, we talked about that real-estate bubble a number of years ago. You’re saying they’ve taken some steps. China, as it goes forward, how do you see them positioned for the next few years here?

Jim Rogers: Well, China is the largest creditor nation in the world. China has been doing a very good job. That doesn’t mean they won’t have serious problems. In the 19th Century, America was on the rise. We had 15 depressions; a terrible Civil War. We had very few human rights, very little rule of law, etc. Massacres in the streets. And yet we became a pretty successful country in the 20th Century. China is going to have all kind of problems. I don’t know what or when or why or how, but I know that’s the way the world works. No company or individual or family or country rises without problems along the way. China is going to have many problems. But whatever problems China has, the rest of us are going to feel the effect, too, because they are the second-largest economy in the world and the largest creditor in the world. So, if China goes into the tank. you better worry about all the rest of us too.

Chris Martenson: All right. Final question here: You have two young daughters. What’s your advice to the younger generations looking to build a prosperous future in today’s world?

Jim Rogers: My first advice for anybody, but certainly Americans, [is that] you need to know at least two or three languages, because the days of the 1950s where everybody learned English and all you had to do is be American – those days are long gone. If I were a young American or young anybody, I would make sure I spoke two or three languages, because it’s going to be a much more international world going forward. We’re going to have to know more about each other. Even if the world economy disintegrates and falls apart, it’s still going to require the successful people to know about the world and be part of the world. As you know, it’s a terrible problem in America. We don’t speak many languages at all. As I say, it’s not 1953. It’s 2013, and that’s not going to be a good thing in the future.